 Despite of extensive attentions paid to
  resource control, e.g., power control and load balancing in femtocell
  networks, the success largely depends on whether operators and users
  accept this technology or not.  In this chapter, we study the economic
  aspects of femtocell services with game theoretic models between
  providers and/or users. We study the cases of monopoly and duopoly and
  aim at answering the key questions regarding operator's revenue, user surplus, and social welfare. We consider
  three services: users can access only macro BSs (mobile-only), or
  open/exclusively use their femto BS (open or closed-femto).  The main
  messages include: 1) it is better off for the operator to provide just the
  open-femto service than a mix of closed and open-femto services; 2)
  two polices of allowing or blocking the access of mobile-only users to
  open femto BS are not significantly differentiated in the revenue; 3)
  flat pricing is advantageous to the operator when users are sensitive
  to price; 4) the incumbent who first starts the femto service
  obtains most of the market share.

\section{Overview and Related works}
\label{sec:intro}
\subsection{Motivation}
The demand for wireless data traffic is dramatically growing and the
monthly demand has been forecasted to reach 6.3 EB~\footnote{1EB or 1
  exabyte is $10^{18}$ bytes.} on 2015, a 26-fold increase over
2010~\cite{cisco_data}.  This unprecedented growth, which is driven by
the introduction
of smart mobile devices and the diversity of multimedia applications,
throws up both
challenges and opportunities for technical and business
communities. In order to
cope with this growing demand, many capacity enhancement solutions have
been proposed. These include the system-wide upgrade to the 4G
infrastructure, for example, LTE and WiMax, mainly by adopting enhanced
physical layer technologies~\cite{IM09LTE} or ad-hoc solutions such as
offloading to WiFi \cite{offloading1,offloading2}. However, more
dominant factor for capacity increase to handle traffic explosion in
cellular systems is efficient frequency spatial reuse by reducing the
cell sizes, e.g., micro, pico, and femto cells \cite{DHL11PHY}.  The key
difference between micro/pico and femto cells largely lies in who
deploys and controls the cell: micro/pico cell deployment is driven by operators, whereas
users of femtocells tend to individually decide on deployment.

The femtocell technology, configuring a very small cell and the
residential broadband backhaul, is economically attractive because it
can achieve high spectral efficiency at a viable cost.  Many
researchers that have worked on femtocells have focused on technical
issues~\cite{YS10,CW09,AC10,SR09,BH09,JM09,CA09,KH10,HC09DO}, for
example, spectrum sharing between macro and femtocells, interference
management through power control, or handoffs and association for load
balancing.  However, limited attention has been paid to economic and
business aspects, which is yet another important factor in the success
of femtocell technology.  Recently, Shetty and Walrand \cite{walrand}
proposed an economic framework and analyzed the economic impacts of
adopting femtocells on the providers' revenue\footnote{We use
`operator' and `provider' interchangeably throughout this paper.},
which inspired our work. After that, the authors in \cite{DH11EVFS} investigates
the economic value of femtocells in view of spectrum allocation
algorithms. 

However, an important issue has remain under-explored: {\em openness of
  femtocells}.  Since femtocells are typically installed in personal indoor
environments, their capacity of femtocells tends to be higher than that of
macrocells. Thus, it is expected that the utilization of the femtocells
seems to be relatively low only with the femto owners' traffic.
Therefore, it may be economically beneficial to users and providers to
allow ``guest'' users to utilize the femto BSs that are open. However,
it is far from clear how beneficial the open femtocell service is,
depending on the factors, which have significant impact on the effect
of femtocells on coping with mobile data explosion.

\begin{figure}[t!]
  \begin{center}
    \includegraphics*[width=0.7\columnwidth]{fig/moc.eps}
  \end{center}
  \caption{Femtocell services: {\em mobile-only}, {\em mobile+open
      femto}, and {\em mobile+closed femto}}
\label{Flo:moc}
\end{figure}

\subsection{Summary}

We propose an analytical market model between the operator
and users to understand the economic impact of sharing femtocells, whose
major features are summarized as follows:

\smallskip
\noindent{\bf \em Service.}  As illustrated in Fig.~\ref{Flo:moc}, we
consider three subscription services for accessing the network, namely {\em
  mobile-only}, {\em mobile+open femto}, and {\em mobile+closed
  femto}\footnote{We simply use {\em open-femto} and {\em closed-femto}
  to refer to {\em mobile+open femto} and {\em mobile+closed femto},
  respectively.}.  As the names imply, the users of {\em mobile-only} services
can access only macro BSs, whereas the users of {\em mobile+open femto} and {\em
  mobile+closed femto} services have access to macro
BSs as well as femtocells.  The users of {\em mobile+closed femto} services
exclusively use their femto BSs, whereas those of {\em mobile+open
  femto} services open their femto BSs which can be shared by other users.

\smallskip
\noindent{\bf \em Policies for sharing open femto BSs.}
Operators can choose one of two policies for users of {\em mobile+open
femto} to share their femto BSs: {\em open-to-all} and {\em
open-to-femto}.  Users of {\em mobile-only} can access open femto
cells under the {\em open-to-all} policy, but not the {\em
open-to-femto} policy, which are open only to the users subscribing to
the femto service. 

\smallskip
\noindent{\bf \em Pricing.}
We consider two pricing schemes: {\em flat} and {\em partial volume
  pricing}.  In both pricing schemes, a fixed service fee is charged for
accessing femto BSs. This is because there is a practical concern that a
complex metering may not be possible in femto BSs.  The difference
between two schemes lies in that in partial volume pricing users pay the
service fee in proportion to the amount of the service by macro BSs,
whereas in flat pricing the fixed fee is also charged for using macro BSs.
The current femto service market trends support our choice of flat femto
pricing. According to
\cite{femto_forum}, for example, Vodafone in Spain offers a monthly
pay plan and other providers such as Sprint and Docomo monthly charge
the cost of BS equipment. KDDI and Softbank in Japan provide the femto
services without additional charge. Verizon and AT\&T in
the US have a similar pricing scheme to the Japanese companies with
minor difference in that they charge only once when the femtocell BS is
installed, as summarized in Table~\ref{tbl:femto}.


\begin{table}[t!]
  \centering
  \caption{Classification of femtocell pricing plans \cite{femto_forum}}
  \label{tbl:femto}
% \begin{tabular}{@{} |l|l| @{}}
 \begin{tabular}{|p{4cm} |p{8cm}|}
  \hline
   Pricing  & Providers  \\ \hline
   \hline
   Free & KDDI (Japan), Softbank (Japan)   \\ \hline
   BS cost & Verizon (USA), AT\&T (USA),  SFR (France), Vodafone
   (New Zealand) \\ \hline
   Monthly&  StarHub (Singapore),  Vodafone (Spain) \\ \hline
   BS cost and monthly &  Sprint (USA), China Unicom (China),
   Docomo (Japan), Optimus (Portugal), SingTel (Singapore) \\ \hline
   Bundling & movistar (Spain) \\ \hline
\end{tabular}
\end{table}

\smallskip
\noindent{\bf \em Metric and market types.} The major metrics are users'
{\em surplus}, operator's {\em revenue}, and {\em social welfare}. We
consider a monopoly market, where a single operator dominates
and fully controls the market price to maximize its own revenue. Users
simply follow the operator's price control and select the service
that optimizes personal use. 

\smallskip

The main messages of this paper are summarized as follows:

\begin{compactenum}[\em 1)]
\item It is beneficial to both providers and users to
have open-femto BSs rather than just closed ones. The
difference between two services tends to grow as the number of users and the
coverage of femto BSs increases. 

\item The impact of open policies is minor in flat pricing. The differences to users
and the provider are not significant whether or not the provider
limits the access of femto BSs to \emph{mobile-only} users. The
subsidy for incentivising the femto users to open their femto BSs does
not have to be large, and only needs to be approximately 10\%-20\% of the price of the {\em
closed-femto} service.

\item The provider can achieve higher revenue with the flat pricing
than it can with partial volume pricing when users are
price-sensitive. However, these differences are significant with less
sensitive users.
\end{compactenum}



\subsection{Related Work and Organization}


The economic aspects of access networks have been addressed by many
researchers \cite{CHS08OFC,MW06WAP,NH07WBA,uplus,malbach}.  The paper \cite{CHS08OFC} performed
financial analysis of femtocell networks and claimed that there could
be significant cost savings using a femtocell network.  Shetty et al
also showed the benefit of femtocell using a mathematical model\cite{walrand}.
However, these work did not address openness of femtocell.  Pricing in
Wi-Fi networks has been addressed in \cite{MW06WAP,NH07WBA}.  In
\cite{MW06WAP}, the authors studied the economic incentives of WiFi
network operators connecting to ISPs.  The paper \cite{NH07WBA}
studied the economic interaction between the WiFi and WiMax network
providers.
 
The openness of access network is addressed in Wi-Fi based networks. In
Korea, one of major provider, LG U+, announced a plan to open WiFi APs
at homes for other guest users to extend WiFi
connectivity~\cite{uplus}. FON \footnote{\url{http://www.fon.com}.}  is
another good example of open WiFi APs, where a user can use any WiFi APs
of FON with no charge, if they allow other users' access subscribing to
FON.  The paper \cite{malbach} dealt with business dynamics of open
Wi-Fi networks. They claim that the evolution of such network depends on
many factors such as initial coverage, subscription fee and user
preference. Our work focuses on the economic aspect of users'
willingness to choose and/or open the femto service. Note that we do not
intend to compare the femto service with other access solutions such as
operator-deployed pico/micro cells or FONs.

The rest of this chapter is organized as follows: In
Section~\ref{sec:model}, we describe the system
model. Sections~\ref{sec:flat} and \ref{sec:volume} provide the
economic analysis
for flat and partial volume pricing schemes, both in the monopoly
market, followed by the the numerical results in
Section~\ref{sec:numerical}.  In Section~\ref{sec:duopoly}, we study the
duopoly case, and conclude the chapter in Section~\ref{sec:conclusion}.


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